Anheuser-Busch NFL deal worth $1.2 billion

In November 2008, after InBev completed its $52 billion acquisition, Anheuser-Busch CEO Dave Peacock wrote letters to 96 owners of pro sports franchises to reinforce the idea that America’s biggest brewery would continue as the biggest buyer of sports marketing assets. Since then, as reports surfaced of budget cuts and the elimination of perks like private jets and large offices, apprehension heightened across the industry. Even as one Anheuser-Busch marketer after another insisted that the company was not cutting its sports budget, the worry remained: Were American sports losing their sugar daddy?

With a pre-emptive strike last week, the “new” Anheuser-Busch snapped up a six-year NFL league sponsorship pact that is easily the company’s biggest sports rights deal, answering emphatically that nagging question about support of the sports industry that it helped nurture. In paying twice what MillerCoors shelled out for league and postseason marketing rights, Anheuser-Busch posted a sign atop its leading 50 percent market share in the U.S.: “Size Matters.”

“We needed to reinforce our commitment to marketing, show it’s a critical component of what we do, and remember we are from the ‘show me’ state,” said Peacock in an interview from his St. Louis office.

In front of its most vital constituency, Anheuser-Busch flexed its muscles.

“This deal is a very dramatic signal to [A-B’s] system of wholesalers and distributors,” said the company’s former sports and media chief Tony Ponturo, now a consultant. “This was a big statement from corporate headquarters to its distribution network that it’s going to keep feeding its brands.”

Determining exact pricing on the deal was problematic, since the NFL was casting the deal as its first billion-dollar sponsorship with an “all-in price” of $1.2 billion over the six years, including rights fees, marketing, media and team spending commitments — more than double Coors’ earlier deal. Inside the league offices, top marketers — none of whom would consent to interviews — were calling Anheuser-Busch’s back-up-the-trucks offer “staggering.” Sources said rights fees for the beer category are about $30 million a year now. Under the new deal, which would start with the 2011 season, they start at $43 million and increase to $50 million over the life of the deal. MillerCoors walked away when the rights fee asking price reached $42 million. “We decided that the money that would have been required to renew could be better used elsewhere,” said Jackie Woodward, vice president of marketing services at MillerCoors, which has a U.S. market share of about 31 percent. “The investment needed to be at a level that made sense.” Beyond that, Woodward would not comment on the specifics of the negotiations.

In 2002, Anheuser-Busch backed away from league rights over the same pricing concerns that made MillerCoors shy away this year. “There was a faction here in the early ’90s that wanted the NFL deal, and there was one that choked on the price,” said A-B’s Peacock, identifying himself as being aligned with the first group. “There was a group here that wanted the NFL back since we lost them.”

Even at an exponentially greater price, “Once we were able to educate those here not as close to the breadth of the NFL audience and the depth of the connection, it became very obvious what we should do,” Peacock said.

When Anheuser-Busch lost its NFL deal to Coors, Ponturo and other Anheuser-Busch officials said the NFL’s equity was largely at the team level and shifted budgets to club sponsorships; it now has deals with 28 of the league’s 32 teams. Now A-B executives are instead wondering what the combination of Super Bowl advertising exclusivity (a 22-year legacy, extended for an additional four years through the deal), along with Super Bowl logos, will allow them to do. Without them, Anheuser-Busch has never been able to produce a Super Bowl can. It’s been unable to supply its wholesalers with Super Bowl point-of-sale advertising to grab valuable retail floor space. The Bud Bowl was created in 1989 because rival Miller owned Super Bowl intellectual property rights. Ironically, the ad time necessary to support the Bud Bowl was the reason A-B originally sought Super Bowl ad exclusivity.

“We felt that if we wanted to be associated with the NFL, we should own it all,” Peacock said.

Jim Schwebel, former NFL senior vice president of corporate sales and sponsorship, negotiated Coors’ original NFL deal. “Anheuser-Busch now owns the Super Bowl from a marketing and advertising perspective,” said Schwebel, now a principal at New York-based lifestyle, sports and event marketing firm Apel Inc. “That’s something that they always coveted.”

As America’s biggest brewers move in and out with official beer rights, the questions will be whether A-B reduces any of its 28 NFL team sponsorships, and whether MillerCoors sheds any of the club sponsorships it acquired to complement its league deal, especially its pricey exclusive deals in Chicago, Green Bay and Minnesota.

MillerCoors’ massive deal with the Dallas Cowboys runs for another decade. Coors could easily continue its four-year-old coaches campaign without NFL marks if it chooses to. There’s also a question as to whether MillerCoors will increase its NFL media presence in reaction to losing the NFL league rights.

“They’ll each maintain an NFL presence,” predicted Kevin Rochlitz, vice president of national sales and partnerships for the Baltimore Ravens, who have sponsorship deals with A-B and Miller. “The weekly consumption patterns with football create demand that’s too meaningful at retail to ignore.”

“We’ll absolutely continue to use sports,” said MillerCoors’ Woodward, without revealing her company’s NFL plans. “It gets beer to the floor and it’s a passion point for our consumers. And we’ve got a nice nest egg now.”

In the last year of a deal with NASCAR’s Kurt Busch, there will be even more money available should MillerCoors look to sign another national sports property. Several sources said Major League Baseball was on MillerCoors’ shopping list. But Anheuser-Busch, an MLB sponsor since 1980, is one of the league’s most tenured corporate partners, so displacing it won’t be easy.

“MLB treasures that relationship, but MillerCoors could match the cash on that one and then it would get down to activation plans and guarantees,” said one industry insider. “Either way, baseball should get a big increase, and they’ll have the NFL to thank.”

Anheuser-Busch’s new NFL rights are domestic only and, unlike Coors, do not include spirits category exclusivity, allowing the NFL to actively sell that category.

The rights also won’t begin until April 2011, leaving Coors with one lame-duck season before Anheuser-Busch begins activating behind its Bud Light brand at next year’s NFL draft.

With Anheuser-Busch’s reputation as sports’ top corporate patron intact, the question is whether the biggest sports expenditure by sports’ biggest advertiser and sponsor will result in more beer sales. It’s worth noting that the deal follows a year that saw the first-ever share decline by Bud Light, along with an overall decline in the beer market.